June 14, 2012

"... who overcome very long odds to produce valuable innovations that others are willing to pay for," according to Edward Conard (who was a partner of Mitt Romney's at Bain Capital).

Mr. Conard embraces economic Darwinism as not just the best but the only route to prosperity and economic growth—to more jobs and higher standards of living. "Survival of the fittest," he writes, "pits new ideas against existing alternatives . . . [and] ruthlessly prunes away less capable alternatives, ensuring that only the most valuable and robust remain."...

[Conard also] shows that money invested by the well-to-do throws off more wealth to society—what economists call the "consumer surplus," or the value to consumers of the new products produced by investment—than the same amount of money when it has been taxed and redistributed. Even charity is bad for the economy, Mr. Conard says, because it diverts potential risk capital to less productive uses.

"However rich these "lucky risk takers" get from starting Google or Apple, or Wal-Mart or FedEx—or for bringing innovation to tried-and-true goods and services—we as a society, Mr. Conard says, reap much more benefit from their inventions than the risk-takers themselves."

And this guy's statement about "Darwinism" is tottally wrong. Mother Nature works by eliminating those that have a debilitating handicap under current conditions. If the handicap is not debilitating, the species may well survive, and the "handicap" may turn out to be an advantage as the conditions change, which they will.Mother Nature is all negative, there is no positive encouragement.

I know scarcely anything about Marxism--in that, I am like nearly all Americans--so I can't speak about it.

I merely yawn at the all-too-common phenomenon of a rich man publishing his deep thoughts...on the practical and moral goodness and rightness of accumulating great wealth, which, as is true of all the countless such self-serving apologia, is meant as a declaration by the author of his own practical and moral rightness and goodness, (and superiority over the stupid, lazy rabble who live as cows).

In other words, it's yet another case of a rich man braying at the poor, "I've got mine, Jack, fuck you!"

There are two small problems with the risk takers are good for us trop.

First the nature of the system moves ASAP into monopoly rents by "Regulations" that raise the cost of competitors entry into the markets out of sight...For The Public/Children.They buy the Government's cooperation to do that.

And in the brave new computer age the Lords have started to form a direct Crony Style of Government financing advantage in a world with paralyzed banks where only the Government's credit card backing and favorable rate is competitive.

THe second problem is that the Chinese prodution wealth has attracted huge rewards for the taking making wars more and more likely.

Equally important is the voluntary nature of transactions. It puts the power in the hands of individuals to decide which products, services, companies and industries succeed and which ones fail. For example, in the early to mid '90s, Nokia could do no wrong. It's stock price soared and peaked in the year 2000 at about $56/share as consumers much preferred its handsets to those of its competitors. More recently, however, consumers have decided they prefer the offerings from Apple and others to Nokia's. Consequently, Nokia has laid off about 40,000 people from its peak and is struggling to survive. Its stock price has declined about 95% from it's peak and now trades around $2.50 per share.

Another example of how much power consumers have is to look at the amount of money Proctor and Gamble spends each year on advertising trying to persuade consumers to buy its soap, toothpase, razor blades, diapers, etc. In 2011, P&G spent $9.3 billion on worldwide television, print, radio, internet and in-store advertising expenses.

That's about 4x more than the combined amount that the Romney and Obama campaigns (and their Super Pacs) will spend trying to persuade voters to elect them president.

Robert Cook said..."Bob Cook will attempt to explain the benefits of Marxism."

I know scarcely anything about Marxism--in that, I am like nearly all Americans--so I can't speak about it.

I merely yawn at the all-too-common phenomenon of a rich man publishing his deep thoughts...on the practical and moral goodness and rightness of accumulating great wealth, which, as is true of all the countless such self-serving apologia, is meant as a declaration by the author of his own practical and moral rightness and goodness, (and superiority over the stupid, lazy rabble who live as cows).

In other words, it's yet another case of a rich man braying at the poor, "I've got mine, Jack, fuck you!"

6/14/12 8:28 AM

And what is wrong with that? Most adult poor are poor from the choices they make. So unless your straw man rich guy is using the coercive power of the State to enrich himself he owes nothing to the poor man. You are correct, screw the poor who are poor by their own device.

For a gut who claims to know nothing about Marxism you sure are big on forcible redistribution.

traditionalguy said...There are two small problems with the risk takers are good for us trop.

First the nature of the system moves ASAP into monopoly rents by "Regulations" that raise the cost of competitors entry into the markets out of sight...For The Public/Children.They buy the Government's cooperation to do that.

And in the brave new computer age the Lords have started to form a direct Crony Style of Government financing advantage in a world with paralyzed banks where only the Government's credit card backing and favorable rate is competitive.

This is a problem because statist (democrats primarily) use the power of government as an extortion racket and as a means to collect bribes by doling favors (pay to play). The problem isn't capitalism but State capitalism.

Persons 2 through 500,000: "Wow! I couldn't get mine, until these guys developed this innovative new product/service/technology to make my business more efficient or possible. Now it's easier to to get mine, and I can get more! Geez, I'm going to need to hire more people to help me keep up!" x 500,000

Persons 500,000 to 3 million:Wow, look! I just got hired! I have a job, and can afford to feed my family and maybe even take a vacation this year!"

Robert Cook wrote: I merely yawn at the all-too-common phenomenon of a rich man publishing his deep thoughts...on the practical and moral goodness and rightness of accumulating great wealth, which, as is true of all the countless such self-serving apologia, is meant as a declaration by the author of his own practical and moral rightness and goodness, (and superiority over the stupid, lazy rabble who live as cows).

I like this comment, maybe because I don't like dogmatic assertion even for ideas with some merit. Let us remember that Mr. Conard is a man on a book tour. It's not like his book is titled "The Economy is Okay and Should Muddle Through"

I think the guy who did the show on NPR and edited a magazine called "Exquisite Corpse" explained why this is true and leads to the failure of communism as well as anybody, and I don't even think he intended to do so.

What he said was that he and his friends who were intelligent would become artists (he was a poet) and work at menial jobs during the day. They paid the same as responsible jobs, but required so much less mental effort that they had plenty left over to write, or paint, or whatever and talk with the like-minded in cafes in the evening.

So basically, the societal resource of the intelligence of these people was dissipated. Capitalism can capture this resource. Self interest showed up in corruption, since no other kind was allowed.

Feel free to reject this observation and to ask a rhetorical question to prove it wrong.

"Does anyone disagree with the claim that the best idea should win and lesser ideas should not?"

Absolutely.

* These comment sections over the last year have been filled with stupid yet valiant defenses of the "rights" of public employee unions.

* 53% of the American electorate thought, somehow, the least experienced person ever nominated for president by a major political party deserved their vote.

* The Clinton Administration, responding to the Greenlining Institute, thought it a great idea to threaten banks with amped-up enforcement of the Community Reinvestment Act if they didn't make home loans to people who couldn't otherwise qualify for normal loans.

Shall I go on?

Lots of people sign on to stupid ideas.

In the public arena, they usually (but, admittedly, not always) revolve around creating a logic for the state's police powers to redistribute wealth (or some form thereof) from productive classes to unproductive classes.

Cuban Bob...Yes, state capitalism is the temptation that is arising everyday. And I ask myself how many wealthy Mormon are above being tempted if that is what is working today?

So anti-trust laws that the first Roosevelt pushed are still needed.

It is the Crisis Mentality that overrides that protections in the system. And the Euro death coupled with de-industrilising Green CO2 myths are still making economic life a crisis of crashed debt bubbles.

No, but you see, those are "good" rich people because a) they are either dead or past their prime (the left so "progressive" is pining for 1938 or '68 depending on the day) or b) Didn't earn their money by "robbing pensions" or doing all that stuff we don't understand on Wall Street.

However, I'm convinced that if you had a private convo with most of the left, they would despise Gates too.

Cook, you are not without qualities, but among them you are a droning, humorless scold.

I'm trying to imagine the kind of nation, or world, you'd want to live in, but whatever that might be, in The Prisoner's words, "You won't get it!"

So try this one. Or, as I'm sure you agree your life is worthless, why not find a cozy belltower and try to inflict some real change? There's no hope for you within the system. Surely a man of your intelligence realizes this.

What keeps you going? Cassandra complex? Don't you know that no one is listening? Doesn't it hurt?Aren't you choked by futility? I was surprised to learn how old you are. Why cling to life and voice in this vale of tears? It's a compliment I'd rather not pay you, but I can't help wondering what makes you tick, or in your case, tock. You have all the fascinating persistence of a cold sore.

who overcome very long odds to produce valuable innovations that others are willing to pay for

I have trouble fully embracing this statement. How long are/were the odds for someone like Mitt Romney? Or George Bush? Or Al Gore? Or a Kennedy? Or George Clooney, whose aunt was already in show business? Etc. Certainly, not as long as the odds for the rest of us.

I also wonder about the "valuable innovations." Steve Jobs, Bill Gates, and others like them offered truly valuable innovations. Others offered shopping centers and pet rocks. Fun, but of little true value.

Lets not kid ourselves about valuable innovations. Some people get rich selling socks or paper bags or singing stupid songs. Fine with me, though.

The question isn't just about how to reward those who are wildly successful, but about how to create an environment in which they'll be willing to take the risks and make the sacrifices necessary to be creative and innovative. Which do you think is a bigger factor in that willingness: (a) the income tax rates they'll have to pay if they succeed, or (b) the downside if they fail?

It seems to me that the answer is clearly (b) for someone who isn't rich yet but has the potential to be rich in a way that we want to encourage. Oh, I think they're motivated by wanting to be rich. But I don't think the difference between one marginal tax rate or another is likely to make them lose interesting in trying to become rich.

I would expect (a) to be a major factor only for people who already are rich and have to deal with those rates first-hand. For instance, I'm sure Oprah Winfrey, who makes hundreds of millions of dollars a year, is aware of her income tax rates, and of course taxes might influence some of her decisions. But if she really wanted to maximize her enjoyment of her money, she would have retired years ago — after all, she has so much money she couldn't possibly spend it all in her lifetime. The same is true of Mitt Romney, Paul McCartney, and so many other super-rich people who continue to be productive year after year. They aren't acting "rationally" in the economic sense of being driven by money. In fact, if you wanted them to be incentivized by money, it would theoretically make sense to confiscate most of their money so that they would actually need to keep working. (There are many reasons that would be a bad idea in practice, which is why I said "theoretically." This is just a point about incentives, not a serious proposal.)

I agree with Conard's basic premise that it's a good thing for people to be rich. In principle, I'd like everyone, including the super-rich, to be able to keep all their money. Unfortunately, it is necessary to have a government, which is funded by taxes. And the taxes have to come from somewhere. I think everyone should be taxed (which is the case, contrary to popular belief), but the rich should pay a higher proportion. I don't know what better, realistic alternative there is. If the government could be fully funded with a simple, low, flat tax, that would be wonderful, but that's not reality.

traditionalguy said...Cuban Bob...Yes, state capitalism is the temptation that is arising everyday. And I ask myself how many wealthy Mormon are above being tempted if that is what is working today?

Better a crooked Mormon than a strident Marxist. And better than a strident Marxist hypocrite who loves the good life as long as he doesn't have to pay for it.

JAC nice post but you overlook one detail: besides anarchists no one is opposed to government in principle but rather the extent and expense of government. For most middle class taxpayers, most of what they are paying for doesn't benefit them and what does benefit them is grossly overpriced.

As for your comment about the super rich, believe it or not for those who do have vast sums of money, the money itself creates a job for them, its watching their investments and making decisions on where to invest the money. Having known people with considerable wealth believe it or not managing their portfolios does take quite a bit of their time.

Right now I'm in the middle of William Hogeland's "The Whiskey Rebellion", about the battle to shape the economy of the early American republic. The central character is really Alexander Hamilton, who clearly believed, as Conard does, that it was important to have concentrated wealth to provide a source for investment.

John Althouse Cohen said...The question isn't just about how to reward those who are wildly successful, but about how to create an environment in which they'll be willing to take the risks and make the sacrifices necessary to be creative and innovative. Which do you think is a bigger factor in that willingness: (a) the income tax rates they'll have to pay if they succeed, or (b) the downside if they fail?

It seems to me that the answer is clearly (b) for someone who isn't rich yet but has the potential to be rich in a way that we want to encourage. Oh, I think they're motivated by wanting to be rich. But I don't think the difference between one marginal tax rate or another is likely to make them lose interesting in trying to become rich.

First you never had the joy of paying 70% at the margin. Yes that does make a difference (God bless Ronald Reagan). Second very few businesses start out as large businesses. For most small new businesses banks aren't willing to loan and venture capitalists angels aren't looking at most new small businesses. So therefore for those businesses higher rates impeded capitalization by way of retained earnings. With enough retain earnings those companies can grow to the point where banks become interested in lending.

Every new business start up owner knows it can fail. Those that have the gumption to start a business believe in themselves and believe they will succeed. Few actually start one with the idea of getting rich but rather with the idea of being masters of their economic fate. The getting rich part is the byproduct of being successful.

Yet who really benefited from their work?------------------------Realize "the rules" have changed. It isn't the 50s anymore where the hero innovator builds piles of American factories that fill with happy, well-paid American workers and the town or city where the Great Man makes his widgets flourishes and grows from the multiplier effect.

The rules have changed, and this is part of the reason why America is so messed up. Capitalism does not play out that way anymore.

Bill Gates grows Microsoft not on innovation but buying up competitors and having 1,000 lawyers out suing new startup firms to help cast a cloud on them so they fold or Microsoft can buy them out.Steve Jobs creates jobs. 95% of them now in China. He's no Henry Ford. Heck, if Henry was around today, all our cars would have been mass assembled in CHina.In recent decades - our economy has had Hero Capitalist innovators make billions for themselves off great new ideas like (1) Greenmail and class action lawsuits; (2)Creation of bundled derivative and junk bond markets that turned out to have no risk to the Hero Capitalist Jobs Creators - because government bailed them out. (3) People that figured out how to shut down tens of thousands of factories and move them to China, and those that gutted whole US service industry segments and offshored them to Indian, East European, and African call centers. (4)Those with the inside track in DC that could get billions in contracts for their Congressional spouses or people that did them contributions favors.

It ain't the 50s anymore. The rules have changed. Gates and Jobs and the billionaires at Goldmans and Infosys and Google and Crown Industries are not American jobs creators.

It's not just survival of the fittest. It's survival of the fit, and bonanza for the fittest. You don't have to be the best to survive; you only have to be good and stay good. It's not easy, but it's not out of reach for most either. The very fittest expand the envelope and create new environments for even more of the adequate who then all increase choice and quality for the consumer.

This organic system is so superior to centralized government control for expanding the lives of people, that anyone who thinks themselves smart and compassionate should be ashamed for not supporting it everywhere they can.

What you are missing Cederford is that many more jobs, in the millions, were created for Americans by Apple. They just weren't in the low tech labor jobs of making the devices. Much of the content, software, delivery, services, sales and repair were good American jobs that are far superior to sitting at an assembly table. That work cannot be here ever again, because we will never agree to the wages needed to compete, unless you want to force people to buy a certain brand.

Certainly Obama, as a non Marxist, would never have shown up in the minutes of a Marxist party as having joined!

"Barack Obama, candidate for State Senate in the 13th Legislative District, gave a statement to the membership and answered questions. He signed the New Party “Candidate Contract” and requested an endorsement from the New Party. He also joined the New Party."

Social Darwinism can make a stronger society, but it can also be destabilizing. And politics is the art of creating stability. Of course, too much stability can be stifling, and will lead to a decline. But not enough stability will undermine the groundwork that is needed to build society.So don't come to me for answers.

I don't have the interest to bother checking whether any of what you posted is true or has not been wrenched out of context, because it doesn't matter. Whatever Obama (or any president) may have said or espoused in his youth--or five minutes ago!--is trumped by what he actually does.

In all that he has done as President, Obama is a loyal servant of Wall Street.

But I don't think the difference between one marginal tax rate or another is likely to make them lose interesting in trying to become rich.

Yes, higher marginal tax rates will likely not make someone lose interest in 'trying to become rich'. What higher marginal tax rates do is make it economically unfeasible for taxpayers at the margin to pursue their ambitions- you are eliminating the option, it is no longer a viable choice. A $250k household may have a total tax burden of federal state and local taxes in the 40% range (or higher), and when you add a 3% rate increase you reduce their discretionary income by $7,500 a year. Do you think that money is the mortgage, or is it the risk capital?

Robert,I am not trying to persuade you. You are clearly unpersuadable, I just want to make sure the facts are out there. Anybody interested can go to the links and assess the truth value and context themselves.

You clearly wish he were far more left wing. Well, you are free to continue to delude yourself as to the prospects of electoral success that that would have brought, just because you would vote for him harder and more emphatically, I guess.

"You clearly wish (Obama) were far more left wing. Well, you are free to continue to delude yourself as to the prospects of electoral success that that would have brought, just because you would vote for him harder and more emphatically, I guess."

I might be encouraged if he showed the slightest left of center impulses...he would have to move from the center to become "left" at all, a necessary first step to his becoming "more left wing."

I didn't vote for Obama last time around...it was obvious before he took office he would betray those who believed in him. I voted for Nader.

"I agree with Conard's basic premise that it's a good thing for people to be rich. In principle, I'd like everyone, including the super-rich, to be able to keep all their money. Unfortunately, it is necessary to have a government, which is funded by taxes. And the taxes have to come from somewhere. I think everyone should be taxed (which is the case, contrary to popular belief), but the rich should pay a higher proportion. I don't know what better, realistic alternative there is. If the government could be fully funded with a simple, low, flat tax, that would be wonderful, but that's not reality."

The problem is, the largest part of government (esp. the federal one) is now dedicated to transfer payments, i.e., redistribution of wealth.

That's just a plain, simple, all-too-obvious fact.

Take away that problem of creating public power to take property from productive classes for redistribution to less or non-productive classes (i.e., theft), and the size, scope and expense of government dramatically shrinks.

And then, in reality, not principle, your wish that "everyone, including the super-rich, to be able to keep all their money," could, in fact, come true.

But you and I both know not only will that not happen - you won't vote to make it happen.

I was told in my useless interdiscipline-touchy feely required classes that "The Golden Rule" is passe. Now, the preferred mantra is "love your neighbor as they choose to be loved". The obvious corollary is "Constantly offend your neighbor while trying to be nice to them".

The neighborhood started shrinking with the left foisted political correct linguistic and societal tyranny on the rest of us.

I care. Someone says these people getting outsized rewards are doing so by overcomeing "very long odds" and producing "valuable innovations." Are they really overcomeing very long odds and producing valuable innovations?

It appears sometimes "yes", sometimes "no" which mean something else is in play, too, and maybe Conard claims are bullshit to convince the masses that having an ever growing ultra rich class if just fine. It's not like he doesn't have a vested interest.

@Rusty, Marxism doesn't work. Teachers, firefighters and police are succubuses who only take,take, take from the taxpayer and contribute nothing to the economy jobs. (I don't know how the get by without eating, shopping, paying taxes, or wearing clothes, but that's beside the point.) "That's Marxism 101."

"Nature, red in tooth and claw" is neither Darwin nor Longfellow but Tennyson. It lives on, long after almost everyone has forgotten who said it, because it captures the scary side of the competition for resources.

And because of fear it seems reasonable to have someone divide those resources up fairly. That way everyone gets some.

Only life and the economy don't work that way.

And try to point out that life and the economy don't work that way and that having government (or the cave dwelling wise-woman) make sure that no one gets more than they need or is unfairly favored because they're the best hunter, means that resources are all used up instead of used to explore more risky opportunities, and you get shouted at about "FU and die" business.

It doesn't matter that Mr. "best hunter" caveman benefited the community by bringing in the most food, he ought not be allowed to keep the best of it, because a surplus of wealth means "FU and die". So "best hunter" can't use any of that surplus to make a deal with "broken bone" to spend his cave-bound hours making lots of nice arrowheads for "best hunter" because "best hunter" should simply be a decent human being and *share*. "Best hunter" has to make his own arrowheads and do his own work instead of going to see what was over that hill-top. This leaves "broken bone" with nothing particular to barter, since "wise cave woman" decided that he's got to make arrow heads, if he wants to or not. Being compelled to give according to his ability without extra goodies is disheartening so "broken bone" does a crappy job of it.

ETC.

Good results, innovation and exploration of new opportunities requires someone having more than they need.

Objecting to people having more, even much much more, than they need is saying "F*ck you and die".

Because end results, it seems, are irrelevant next to proper *feelings* about it all. If we all starve to death, at least we'll have felt just the way that we ought and given no one cause to accuse us of hating poor people.

Bullshit on stilts, RC, and you know it. It was the conservatives in that class that suggested that it's a good rule to live by, only to be told by the bleeding heart liberal teaching the class that we're wrong and to do so forces our morals on someone else.